A former hedge fund manager who retired at 36 is sounding the alarm on the Trump trade

Investors have been crowding into the same bets as they speculate the impact of President Trump’s proposed policies.

With Trump promising increased fiscal stimulus, infrastructure spending, and generally pro-business policies, investors from individuals to mutual funds to hedge funds are making the same big bets on the market, forecasting higher yields, an upside in equities, and a bullish view on commodities.

But Raoul Pal, a former hedge fund manager who comanaged the GLG Global Macro Fund for GLG Partners in London and retired at 36, warns that these investors should be careful.

According to Pal, if everybody else is short bonds, long equities, long oil, long copper, then avoid the herd. “Look for
other sources of return so they’re not so crowded as everybody else’s because those are the ones where the maximum risk lies.”

If the bets don’t play out and there’s a reversal, even a short-term one, “it can be very painful if too many people are involved in a certain trade.”